J.P. Morgan's Take On China Inflation Data

The US bank suggests recent policy announcements are unlikely to be enough to bring China out of deflation, but notes lower China export prices can help curb inflation pressures in key trading partner economies.

• "Headline CPI, PPI and GDP deflator all have now turned negative in China. Deflation risk in China reflects unique domestic problems, such as lagging and weaker recovery in domestic demand, high unemployment and lack of wage inflation pressure, weak rental cost, and unexpected large drops in auto prices and pork prices. The government has started to emphasize on boosting consumption, but so far policy responses seem insufficient and do not address the key issues, e.g., boosting household income, reducing precautionary savings and providing funding support for pro-consumption measures. China’s deflation concerns could turn out to be good news for global disinflation. Declines in China’s export prices have benefited key trading partners of China. Our recent study suggests a China spillover to global (ex-China) core goods inflation of around -70bp over 2H23."